Question - Creative Crates Co. produces wooden crates used for shipping products by ocean liner. In 2014, Creative incurred the following costs.
Wood used in crate production $56,610
Nails (considered insignificant and a variable expense) $520
Direct labor $42,020
Utilities for the plant: $3,000 each month, plus $0.48 for each kilowatt-hour used each month
Rent expense for the plant for the year $25,120
Assume Creative used an average 800 kilowatt-hours each month over the past year.
(a) What is Creative's total manufacturing cost if it uses a variable costing approach?
(b) What is Creative's total manufacturing cost if it uses an absorption costing approach?